Inside Turntable.fm: Social Networking Meets Internet Radio

Turntable.fm Had 207,000 Uniques in July -- Impressive, But Not as Big as Some Said

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A strange thing happened on the way to the latest digital music revolution.

As U.S. consumers and recording industry executives wait to see if Spotify and Apple can usher in a new era of cloud-based music streaming, Turntable.fm has become the most buzzed-about digital music service in years.

The New York-based startup is at the forefront of a new wave of music sites that mix Internet radio and social media. Listening Room allows users to play songs for their friends in a casual "room"-like setting. Console.fm pulls dance music tracks from SoundCloud and organizes them by genre. All let visitors chat with one another while the music plays.

And while these services enable users to pick which songs they play for their listening audience, none of them have direct licensing deals with labels or music publishers. Instead, Turntable.fm and Listening Room are configured to operate as "noninteractive" webcasters under the U.S. Digital Millennium Copyright Act (DMCA) -- a legal distinction that has raised eyebrows in some quarters of the music business. (Console.fm only offers tracks that SoundCloud users post for public use.)

The undisputed leader of this emerging niche is Turntable.fm. The site has its origins in Stickybits, a startup that raised $1.9 million to create a mobile app that scans bar codes to get product information. Facing dim prospects on their original concept, co-founders Seth Goldstein and Billy Chasen decided to start over. They registered the domain name "Turntable.fm" in January and several months later launched their latest project.

The concept is simple: Turntable.fm users can create or join rooms where music is played. The site resembles a cartoon version of a loft party featuring five DJs, represented by their avatars, each manning a laptop computer. The room's guests, represented by their own avatars, are spread around the room and face the DJs so that only their backs are visible.

Although the site is still operating on an invite-only beta basis, Facebook users can join if they have a friend who's already registered. Navigating a seemingly endless list of rooms is made easy by Turntable.fm's integration with Facebook. When users enter the site they'll start at what's called the lobby. At the top of a list of rooms are the ones in which their Facebook friends can be found.

The site's hundreds of user-created, themed rooms, listed from most to least crowded, are dominated by a handful that cater to indie rock and electronic music fans. "Indie While You Work" regularly ranks at or near the top of the list. On a recent Sunday night, 108 listeners filled a room to hear DJs spin a mix of such acts as Midlake, the Black Keys, Crystal Castles, Destroyer and the Decemberists. "Ambient Chillout & Trip Hop" is a favorite electronic haunt, where nearly 200 people gathered on a recent weekday morning to hear laid-back songs by Massive Attack, Bonobo and Air.

But Turntable.fm is about more than passive listening, incorporating a mix of social networking, gaming and online chatting that's perfectly suited for music discovery. "I think it's fun," says Scott Lapatine, founder of music blog Stereogum. "It appeals to people who want to hear new music from people they trust."

Like other social networks, Turntable.fm enables listeners to follow other users and receive emails when they start DJ'ing. Like an online game, DJs on the site earn points when listeners approve of their songs and use the points to trade up to bigger or more outrageous avatars than the stock ones they're assigned upon signing up. And like an online chat room, the site provides a forum for listeners to talk about the song being played, crack jokes or commiserate over choices they don't like.

Turntable.fm currently has more than 371,000 monthly active users, up from about 50,000 a month ago, according to AppData, which tracks traffic at Facebook applications. The site's swift rise has created a modest media frenzy. Co-founders Goldstein and Chasen have responded to the attention -- and enhanced the site's mystique -- with near-complete media silence, opting instead to wait until the site is out of private beta, Chasen told Billboard in an email. Goldstein recently surfaced just long enough to deny a report that the company had closed a $7.5 million round of funding that would have valued the company at $37.5 million.

Turntable.fm's popularity and ease of use raise an inevitable question faced by all music startups without licensing deals: Is it legal? Although the site differs from Pandora and other Internet radio services, its design represents a clear attempt to qualify as a noninteractive webcaster.

Under the DMCA, noninteractive webcasts and online simulcasts of terrestrial radio -- which don't enable listeners to listen to a song on-demand -- can play music without negotiating licenses with labels and music publishers. Instead, they can play music under a statutory license that requires them to pay rights-holders a per-stream royalty through SoundExchange. Some label executives say privately that they suspect Turntable.fm doesn't fit the definition of a truly noninteractive webcaster, although they acknowledge that they're still familiarizing themselves with the service.

To be considered noninteractive, a music service must satisfy a number of requirements. The service must limit the number of times songs by the same artist can be played within a three-hour period. It can't reveal in advance the titles of specific songs or names of albums or artists that will be played. And it must display the artist's name, song title and album title while playing a track.

Turntable.fm has built-in limitations in an effort to meet these requirements. For example, if a room has only one DJ, songs played from a DJ's queue can be heard in their entirety by everyone but the DJ, who can only hear a 30-second preview of each song. When there are two or more DJs working a room, each can listen to the tracks they choose in their entirety but not on-demand -- instead DJs add tracks to the room's song rotation. Listeners in the room have no control over the songs being played and don't know what will be played next -- just like with any other Internet radio station.

The service also follows the provisions in the DMCA regarding the removal of infringing content. Although Turntable.fm allows DJs to select from a catalog of songs licensed by white-label digital service provider MediaNet, it also lets them upload and play songs that aren't in MediaNet's catalog.

DJs tend to upload rare remixes, tracks ripped from vinyl and occasionally their own songs. The DMCA's provisions come into play when a content owner spots an infringing track, such as previously unreleased studio tracks or live bootleg recordings. In such cases, Turntable.fm must conform with DMCA guidelines that require such services to respond to takedown notices filed by copyright owners.

While it hasn't attracted as much recent attention as Turntable.fm, Listening Room has been developing a business around a similar mix of noninteractive webcasting and social networking elements. Founder Abe Fettig, a Portland, Maine-based Web programmer, came up with an idea for the kind of music site he would enjoy -- a "comfortable place to talk about music," as he calls it.

Fettig put up a working version in late 2010, attracting attention through word-of-mouth. After taking the site off­line in January to address bugs and traffic problems, he used the downtime to read up on copyright law and hired a lawyer to ensure that the site was DMCA-compliant before relaunching it in March. Listening Room lacks Turntable.fm's avatars and MediaNet catalog -- users upload songs to their DJ queue and its spartan layout resembles a blog post that keeps a running tally of songs played. But it still features a social element that distinguishes it from traditional webcasters.

While time will tell whether rights-holders will challenge the noninteractive status of newcomers like Turntable.fm and Listening Room, these services provide yet another illustration of the pivotal role that the DMCA is playing for startups building businesses around the consumption of music.

On-demand subscription streaming music services, which are saddled with licensing costs that exact a heavier financial burden than webcasting royalties, are still struggling to appeal to a mass consumer market. According to the RIAA, U.S. on-demand services like Rhapsody, MOG and Rdio had a combined 1.5 million subscribers at the end of 2010, up 25% from a year earlier.

But that was still dwarfed by Pandora's registered user base of about 80 million in January, a tally that recently topped 100 million, according to the webcasting company. Like Pandora, the new social music services are eyeing advertising, not subscription fees, to generate revenue -- a strategy that would be all but impossible without the provisions of the DMCA.

"I'm grateful the statutory license is there," Fettig says. "I don't mind having to do what I have to do to comply with the law."